The gloves are off in the battle for market share in the Potash market.

Uralkali Breaks Potash Accord to Grab Market Share - Bloomberg

OAO Uralkali (URKA), the world’s largest potash producer, upended the $20 billion-a-year commodity market by abandoning limits on output that underpinned prices while halting cooperation with Belarus that controlled supplies from the former Soviet Union.
The announcement of the decision yesterday sent shares of potash miners plunging as much as 27 percent from Israel to Germany to Canada and the U.S. as investors speculated a flood of supplies will lead to lower prices for the soil nutrient that strengthens plant roots. Uralkali, part-owned by billionaire Suleiman Kerimov, said it exited its marketing venture with Belarus after its neighbor undermined sales accords.

“Uralkali’s announcement completely turns the global potash market upside down,” Elena Sakhnova, a VTB Capital analyst in Moscow, said by phone. “If previously global potash producers were acting like an oligopoly, working with the rule that benefited higher potash prices over shipped volumes, now the market will be fully competitive.”
Uralkali’s venture with Belarus, and a group comprising Potash Corp. (POT) of Saskatchewan Inc., Mosaic Co. and Agrium Inc. (AGU) played off each other, moderating output and exports along with demand to prevent price swings.
Uralkali shares fell 19 percent to 151.92 rubles in Moscow yesterday, the biggest drop since November 2008. Trading was suspended for a half hour after shares crossed the 20 percent threshold.

Trading ‘Deadlock’

K+S AG (SDF) shares plummeted 24 percent in Frankfurt, the most in 14 years, and Israel Chemicals Ltd. (ICL) fell 18 percent in Tel Aviv. Potash Corp. and Mosaic both dropped 17 percent in New York and Agrium declined 5.4 percent.
Uralkali plans to switch exports to its own unit, Uralkali Trading, from Belarusian Potash Co., a joint venture with Belaruskali set up in 2005 to bolster their market position. Cooperation reached “a deadlock” after Belarus’s government canceled BPC’s exclusive right to export the nation’s potash and Belaruskali exported the fertilizer ingredient on its own, the Berezniki, Russia-based producer said in a statement.
Filipp Gritskov, a BPC spokesman, declined to comment, as did Olga Dolgaya, a spokeswoman for the government of Belarus.
“The potash price may fall below $300 a ton after the change in our trading policy,” Uralkali Chief Executive Officer Vladislav Baumgertner said. That’s at least 25 percent below the current contract price for China and the lowest since January 2010. The price will remain higher than $200 a metric ton, the production cost level for some international producers, he said.

Price Decline

Potash in Vancouver, an export port for the commodity, fetched $410 a ton as of July 29, according to weekly price data from Green Markets. The price has dropped 19 percent in the past 12 months. It reached $840 in 2009 before plunging to $325 the following year as farmers postponed purchases.
Uralkali, which has the lowest production costs among international peers, will run at full capacity next year, Baumgertner told reporters by phone. Output will rise to 13 million tons in 2014 from 10.5 million tons this year, he said. Uralkali’s production cost is $62 a ton, compared with more than $100 a ton for North American producers and almost $240 in Europe, according to a company presentation in July.
Other global producers will be hurt more than Uralkali, which will be cushioned by increasing sales volumes, Sakhnova said. It’s the only potash producer that can ship potash by rail directly to China, the largest consumer of the soil nutrient, and it may hinder Belarus’s reach into the market, she said.

China Supplies

Rail deliveries to China will reach as much as 2.5 million tons of potash annually, Baumgertner said. Uralkali forecasts stable revenue on increased sales volumes and will keep its dividend policy unchanged, he said.
Uralkali will extend its first-half supply contract with China through December, meaning it will ship as much as 500,000 tons more potash to the Asian market by the end of the year, Baumgertner said. The price may be cut from the current $400 per ton, he said.
China’s current spot price of $350 a ton may “to some extent” be considered a target this year, he said.
Uralkali hadn’t planned to renew the China contract this year, hoping to sign a new agreement in October or November at a price no lower than the current level, according to a statement from Baumgertner on May 29. At the time, it also cut railway shipments by about two-thirds to get a higher price.

Billionaire Sales

Uralkali said July 22 it bought back about $1.3 billion as part of a $1.6 billion repurchase program. Goldman Sachs Group Inc. cut Uralkali to hold July 24, a day before VTB Capital reduced its rating on the stock to sell.
Anticipating the shift in trading policy will create volatility in the share prices of all global potash producers, including itself, Uralkali said it has frozen the buyback program and won’t make a tender offer for its stock by the end of the year, according to Baumgertner. Last month, Baumgertner said that the board in November may consider more stock purchases so that major shareholders could participate.
Billionaire Alexander Nesis sold off his 5.1 percent stake in Uralkali, the company said July 26, two weeks after the company completed buying out shareholder Zelimkhan Mutsoev for $1.3 billion.
Uralkali also decided against proceeding with its Polovodovskoye greenfield development because of the potential changes in the potash market, Baumgertner said.
“No longer does Uralkali plan to follow a price before volume strategy,” analysts at Liberum Capital Ltd., led by Sophie Jourdier, said yesterday in a note. “We expect global potash prices to fall.”
To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net
To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

As of 2011, approximately 89 million barrels of oil and liquid fuels were consumed per day worldwide. That works out to nearly 32 billion barrels a year.

How many gallons of oil are there in a barrel?

42 US gallons (35 imperial gallons), or 159 litres.

Where is the bulk of oil demand growth going to come from?

In the next five years, almost half of global oil demand growth will come from China, and this trend is set to continue to 2035, as oil demand from the transportation sector is growing strongly in countries such as China and India. In contrast, oil demand among OECD countries is expected to decline over the next two decades, driven mostly by government policies on fuel efficiency and the fact that rates of vehicle ownership are already high.

Investors typically expect the stock price of gold mining companies to be strongly correlated with the price of gold. But, since 1996, gold has increased by more than 400% in price while the performance of individual gold stocks has shown a wide range in trends and sensitivities.

There’s at least one response that gold companies can take to better manage stock performance: comprehensive economic measurement, otherwise known as economic margin¹ analysis. In our experience, implementing this kind of framework — which incorporates consideration of cash flow, investment and cost of capital — can help companies quantify the key drivers of long-term stock performance and, accordingly, support executive decision-making.

Many buy-side analysts are already doing it anyway and better value is created in the process. The explanation usually lies in the framework that allows for the measurement of net impact from all factors under the company’s control to lead to quantitative models. Those models in turn enable quantitative decision-making based on the intrinsic calculation of stock prices. Put another way, executives can use the framework to effectively predict the effect of various capital investments on the stock price.

At the end of the day, successful companies measure results, make decisions and set strategy with the goal of creating value.

A company’s performance measures must serve as a proxy for its market value creation. Economic margin is simply a more complete performance measure to guide performance and motivate employees.

What affects the price of gold
It’s no mystery that the price of gold is affected by myriad technical and fundamental factors, including the following:
Supply and demand;
Emergence of financial instruments;
Economic and company events;
Gold reserves and resources;
Costs of operations and capital.

Of course, everyone is affected by the commodity price; it’s the mixed performance of various stocks that exposes the company to specific factors playing a bigger role in the commodity-stock delinking phenomenon.

Gold consumption and supply
Between 1996 and 2011, annual gold consumption increased at a compound annual growth rate (CAGR) of 2.96% versus 2.37% for supply. That demand was driven primarily by investments in bars, coins and exchange-traded funds (ETFs), the latter of which in particular have enabled easy trading removed from the insecurity of physical gold. Supply during that timeframe, on the other hand, was constrained by decreasing average sizes and deteriorating quality of new deposits as well as increasing operational cost pressures.

Meanwhile, various macroeconomic events of the sort that directly influence gold investors’ behaviour (such as the recent global economic downturn) continue to have a strong impact on the spot gold price and contribute to both price volatility and deviations from long-term supply and demand fundamentals.

A three-fold spike in capital requirements
On the stock performance side, increased gold prices have resulted in higher revenues. On the other hand, declining grade quality has led to fewer ounces of gold being extracted from each ton of ore, resulting in lower average margin potential per ton due to higher cost of production per ounce. The challenges in finding high-quality resources, meanwhile, along with corresponding increases in the cost of exploration and development, have resulted over the past 10 years in a three- and sometimes four-fold spike in invested capital requirements per ounce produced.

Depreciable assets per ounce have also increased over the last 10 years at a similar scale on rising discovery, acquisition, construction and equipment costs. And working capital requirements have gone up due to increased post-production inventories because rising prices have nevertheless made it more economical to process lower grades.

It gets better – by which, I mean worse
Since 2000, operating cash flows of mining companies have been impacted by rising material and consumable costs. Some gold companies have experienced total cash cost increases between 100% and 325%. Those increases have in turn reduced the impact of enhanced revenues from the rising price of gold on operating margins to the tune of 34%-87% compared to the 400% commodity price increase.

Added to all of that, evidence also suggests that cost of capital has decreased by an average of 1% in absolute terms, leading to significant improvement in the valuation of gold stocks.
"Economic Margin Framework" is a trademark of The Applied Finance Group (AFG) and is used here with permission.

#Gold prices will top $3,000/oz in 5 years

The growth outlook for Europe and Japan remains fragile. Their quantitative easing is likely to remain intact through 2013.

A limited crisis in emerging markets is still possible. As hot money is leaving them

What diverging monetary policies signal: Andy Xie

Commentary: Gold prices will top $3,000 per ounce in five years

By Andy Xie

BEIJING (Caixin Online) — The monetary policies of major economies are diverging for the first time since 2008. The euro zone, Britain and Japan are sustaining quantitative easing, while the United States, China and other major emerging economies are on a tightening path.

The divergence is creating trends in some markets, volatility and confusion in others.

The U.S. dollar DXY 0.00% is on a strong trend, as the expectation of the Fed’s tightening is driving deleveraging of dollar-financed carry trades. On the other side of the strong dollar are a weak pound GBPUSD +0.01% , euro EURUSD -0.04% and yen USDJPY +0.09% .

The decline of commodity currencies is the clearest trend. The Australian dollar AUDUSD -0.22% , Canadian dollar USDCAD +0.01% and the currencies of several commodity-export-dependent emerging economies have declined sharply. The trend is likely to continue throughout the year.

Stocks will remain volatile on conflicting news regarding liquidity and growth. Fueled by asset inflation, the United States’ growth rate is picking up, and dollar liquidity is receding in anticipation of higher interest rates ahead.

The growth outlook for Europe and Japan remains fragile. Their quantitative easing is likely to remain intact through 2013. Most big companies are global in their sales and earnings. Hence, their stocks will fluctuate with mixed news on growth and liquidity.

A limited crisis in emerging markets is still possible. As hot money is leaving them, they are facing difficulties in adjusting to the tighter liquidity environment. The recent political disturbances in Brazil, Egypt and Turkey amplify the uncertainties.

Gold is likely to perform well in the second half of 2013. While the rising U.S. dollar keeps downward pressure on the price of gold, rising global uncertainties support its role as a safe haven. Further, gold pricing is shifting to the East from the West.

The Shanghai market is likely to overshadow London or New York within five years. Hence, the price of gold will increasingly track China’s monetary policy rather than that of the United States.

The dollar’s long shadow

A rising dollar is the most important trend in financial markets. Its importance is in the role of dollar liquidity in carry trades since 2008. Since 2008, the Fed has communicated its intentions clearly to the financial market. It decreased the risk to using the dollar to fund speculation.

Based on the surge in the forex reserves of emerging economies, it appears that trillions of dollars of hot money have flowed into emerging economies. A strong dollar is triggering a reversal. The full consequences are yet to be felt.

The U.S. economy is recovering. Without fiscal consolidation, it could be growing at 4% to 5% now. I believe asset inflation is driving the U.S. economy. Its current net household wealth has surged 45% to $70 trillion from the low of $48 trillion in 2009, and significantly above the pre-crisis peak of $63 trillion.

The Fed’s tightening is primarily to prevent a full-blown asset bubble. Its burst could bring another financial crisis.

As the global tide of hot money recedes, the chances are that the United States’ asset markets will be resilient. Much of the hot money will just vanish due to deleveraging. Some money will be reallocated to the U.S. market from others. Hence, the United States’ asset prices are better supported than others.

In the medium term, the U.S. dollar’s outlook hinges on the continuing rise of the U.S. stock market. It is a self-fulfilling expectation.

If most investors believe in the U.S. economy, the money will flow into the country’s stock market. Its rise creates enough wealth effect to sustain the economy. The strong economy justifies the optimism. The money keeps coming.

In the longer term, if the fundamentals improve sufficiently, the bubble element in the economy could be digested through flattening out asset prices while letting the economy grow. Energy and agriculture are bright spots for the U.S. economy.

They aren’t sufficient to carry the economy. The key to the U.S. dollar’s future, in my view, is in improving the quality of the U.S. labor force. Without major progress there, the dollar will collapse again.

Changing places

The United States’ virtuous cycle depends on lack of competition for money. The main alternative is China. Since China joined the World Trade Organization, global money flow has favored it. This was a major factor triggering the weak dollar between 2002 and 2012. After 2008, the flow to China at the expense of the United States accelerated.

When international money flows to an economy and is used to enhance its competitiveness, the optimism is validated, and the money inflow will receive its appropriate reward by sharing in the growth.

However, the money could be used to finance an asset bubble. It creates paper gains for the capital inflow in the short term. The optimism is validated too, which encourages more inflow. But, this is an unsustainable dynamic. When the bubble peaks, everyone realizes that the optimism is misplaced. Capital flight follows, and with it the bubble bursts.

China’s economy was mismanaged after 2008. Instead of learning from the bubble disaster of the United States and embarking on structural reforms to improve competitiveness, China merely used fiscal and monetary stimulus to amplify an existing bubble, creating a feeding frenzy of getting rich overnight. As the U.S. economy improves and attracts more money, China’s bubble bursts.

To reverse the situation, China must embark on structural reforms to improve competitiveness. It has a major advantage over the United States. With per capita income of $6,000, its growth potential is far greater. If the reforms can convince the market that China’s potential can be realized, the money will return.

The competition between China and the United States for money is a key global dynamic. The yo-yo dynamic between the two will dominate the global economy for decades. It amplifies the up-and-down cycle in either.

As the composition of growth is quite different between the two, other economies will float up or down depending on their relationships with either.

Commodity currencies

The yo-yo dynamic now is in favor of the United States. Hence, the economies that have benefited from China’s boom are suffering. Commodity exporters are the most exposed. Their currencies are adjusting to reflect the new reality.

The Australian dollar has declined nearly one-fifth from its peak. There is much more to come. The most vulnerable commodities to China’s down cycle are industrial minerals.

Since China joined the World Trade Organization, the price of iron ore rose nearly ten times. Australia has benefited enormously from the trend. It suffers most on the way down too. The Australian dollar’s adjustment is not half done, in my view.

I thought that oil would be resilient compared to industrial minerals because it cannot be recycled. It has performed even better than I expected.

China’s electricity production has slowed two-thirds. The price of oil should have halved. But Brent crude remains above $100 per barrel, down less than 20% from the last year’s peak. Its strength is probably due to Saudi Arabia managing supply and the turmoil in the Middle East.

The uniqueness of the energy story suggests that the currencies of energy exporters like Canada and Russia perform better than that of mineral exporters like Australia and Brazil.

Emerging economies as a whole are facing difficulties. They suffer declining export prices and hot money leaving. To stop a vicious spiral of currency depreciation and inflation, they have to tighten monetary policy in an economic downturn.

If they try to protect growth by easing monetary policy, the vicious spiral could lead to another emerging market crisis like in 1998.

Gold moves East

There is a negative correlation between the U.S. dollar and gold in recent history. In light of the strong dollar, huge amounts of short positions have been built up in gold and gold stocks. I suspect that the correlation won’t work in the second half, and such short trades will turn out badly.

At the beginning of the year, I expected that a strong U.S. dollar would pressure the price of gold in the first half. But it would perform better in the second half as the U.S. stock market slows, diverging less money away from gold.

A new factor strengthens the case for gold. The physical demand has been extraordinarily strong in response to the slide in the price of gold. This could be a turning point in gold history. The pricing of gold may move permanently to the East from the West.

China and India account for roughly two-thirds of global demand for gold. Other emerging economies account for most of the rest. But, the price of gold is fixed in London or New York and driven by U.S. monetary policy. This is obviously wrong. But inertia is a powerful force. Financial markets continue with what has worked in the past.

The tension between where gold is priced and where demand is located is manifesting itself in two ways: first, gold shops in Asia have no physical gold to meet demand; and second, the price of gold set in Shanghai is consistently higher than in London or New York.

Physical gold is likely to flow from the West to the East due to the pricing gap. It is only a matter of time before the warehouses of London and New York are emptied.

When the stock is all shifted to the East, the price fixed in Shanghai will become the real price. The gold exchanges in the West will wither.

China lost gold to the West from the mid-19th century onwards. Domestic uncertainties drove waves of immigration financed by gold. The trend has reversed over the past decade. And the trend is likely to accelerate in the coming decades.

India has the most gold in the world. The Fed has the most gold reserves among all central banks. China is likely to surpass both in the coming decade.

Gold is a substitute for money. Gold production is about 3,500 tons per year and is worth $154 billion or 951 billion yuan ($154.9 billion) USDCNY +0.01% . China’s M2 is likely to rise by 14 trillion yuan or 16 times the gold supply.

Within five years, China’s M2 could rise by 2 trillion yuan per month, while the supply of gold will remain the same. Gold should trade with China’s money supply, not with that of the United States.

In addition to China, India will remain the second largest source of demand. Even if its economy grows at 5% per year, proportionally, its gold demand will increase by 28% in five years.

As the Bank of Japan targets 2% inflation, the Japanese have become a force in gold demand too. Looking beyond the shadow of the strong U.S. dollar, gold has a very bright future. I believe that the price of gold will top $3,000 per ounce in five years.

July 11, 2013

Since 2010, he has presided over the loss of $50 billion of shareholder value in EBX Group stock

As if he did not have enough problems, now this.

The massive Port of Açu is being dogged by scientists' claims that its construction is polluting the surrounding lowlands ecosystem with salt.

Ecological risks may spell trouble for Eike Batista's port

Author: Jeb Blount - Reuters
Posted: Thursday , 11 Jul 2013

SÃO JOÃO DA BARRA, Brazil (Reuters) -
As Brazilian billionaire Eike Batista breaks up his crumbling EBX Group industrial empire to pay off debt, one of the few assets he's expected to keep is port-development company LLX Logística SA.
But raising the more than $600 million needed to finish LLX's only project, the massive $2 billion Port of Açu north of Rio de Janeiro, may be a struggle. One-and-a-half times the size of Manhattan, Açu is designed to ease delays caused by Brazil's overcrowded ports and serve a booming offshore oil industry. It's also being dogged by scientists' claims that its construction is polluting the surrounding lowlands ecosystem with salt.
Raising money for anything associated with Batista, a serial entrepreneur who once boasted he would become the world's richest man, won't be easy. Since 2010, he has presided over the loss of $50 billion of shareholder value in EBX Group stock. EBX controls LLX and five other traded companies, all branded by Batista with an "X" to signify "the multiplication of wealth."
And while there are strong business reasons to invest in a giant port that eases some of the transportation bottlenecks holding back Brazil's commodities-led exports, some investors may not want exposure to a company facing possible ecological liabilities and potentially costly lawsuits.
Eduardo Santos de Oliveira, an aggressive federal prosecutor, has already launched a case against the port to determine civil liability for alleged environmental damage. Oliveira, the prosecutor in Campos de Goytacazes, the largest city near the port, has previously drawn global attention for launching Brazil's largest-ever environmental lawsuit.
That case sought nearly $20 billion from Chevron Corp and rig contractor Transocean Ltd over an 2011 oil spill. And while criminal charges were eventually dropped in February, and actual civil damages are expected to be a tiny fraction of Oliveira's request, the case sent a chill through the entire Brazilian oil industry.
"I am by no means an environmental specialist," said Will Landers, who manages $6.5 billion of Latin American investments for Blackrock Inc, the world's largest asset manager. "But the fact that you need to be one to invest in this type of project should limit significantly the pool of investors that may one day be willing to entertain giving fresh capital to any company from the EBX group" the São Paulo-born Landers said.
How much environmental damage has occurred is a matter of fierce debate. Officials for LLX and OSX Brasil SA - the EBX company building a shipyard at the port - deny that a "temporary" leak of salt-water into surrounding marshes in late 2012 caused lasting ecological harm to the delta of the Paraíba do Sul River, one of the last large, undeveloped coastal lowlands on Brazil's southeast coast.
Yet scientists at Northern Rio de Janeiro-State University (UENF) in Campos de Goytacazes, a 40-minute drive from Açu, say there is growing evidence that the port's construction threatens a sensitive ecosystem.
While the UENF researchers are careful to say they don't have conclusive proof of long-term damage, they say Açu's surrounding marshes, pastures, lagoons and fields, along with crops and cattle, face a serious threat.
"Preliminary data show salinity could lead to the permanent contamination of the soil," said Carlos Rezende, professor of bio-geochemistry and ecology at UENF. "We also have anecdotal evidence that the ecosystem around Açu is being harmed."
LLX and OSX declined to make Batista or other senior executives available for interviews about the port or the salinity issue.
UENF, LLX, OSX and INEA, Rio de Janeiro's state environmental protection agency agree on at least one point: that water in the Quitingute Channel, which gets run-off from the port, became brackish, or partly salty, in late 2012, documents in the court case show. The salination began after the world's largest dredging ship began digging up beach, dunes and marsh to build 13 kilometers (8 miles) of docks and ship channels.
The salt came from dredging waste saturated with sea water. Deposited in dumps to dry, the sandy soil was then spread on the surrounding lowlands, raising the land as much as 5 meters (16 feet) above the floodplain, Ivo Dworschack, the manager of the OSX shipyard said during a March visit.
"Based on statements presented by INEA, LLX and OSX is it incontrovertible that there was an increase in the salinity of the Quitingute Channel as a result of that (dredging) work," Federal Judge Vinícius Vieira Indarte wrote in a February 15 ruling.
The ruling on prosecutor Oliveira's initial filing accepted that the court had grounds to rule on the case and that the prosecutor had grounds to investigate potential civil liability for salination. The judge, though, denied Oliveira's request to stop work at the port.
The port's iron ore terminal, part owned by global miner Anglo American Plc. and the OSX shipyard were supposed to be open by now. Most things at LLX are months or years behind schedule. Some companies who had planned to build facilities within the complex, such as China's Wuhan Iron and Steel Co, have pulled out.
OSX, once expected to be LLX's biggest tenant, will likely be restructured as part of Batista's efforts to slim down the EBX group and pay down debt, selling the vessels owned by its ship leasing business and shuttering the yard before it has built a single ship, a source with knowledge of Batista's plans told Reuters. EBX declined to comment on the restructuring plans.

SALT IS 'FOREVER'

The leak was serious enough for INEA on February 1 to levy more than 3.3 million reais ($1.45 million) of fines on OSX. INEA said levels in the Quitingute Channel were four times higher than those in fresh water. They've since returned to normal, INEA said in an e-mail.
INEA ordered compensation for farmers, credited UENF with alerting it to the problem and promised a joint INEA-UENF study. It did not explain why it fined OSX and not LLX. OSX is appealing the fine.
The study, though, was never done, and farmers have not been compensated, and salt levels are not normal in the Channel, Rezende's group at UENF said.
On January 29, Rezende's colleague Marina Satika Suzuki, a professor of inland-water-studies, measured salt levels at nearly 16 times the level Brazil's agricultural research agency, Embrapa, considers safe for irrigation. Levels above the limit can permanently damage farmland.
On May 14, those levels were still nearly 6 times higher.
"What does permanent salt build-up mean?" Suzuki asked. "Have you heard of Carthage? The Romans salted the land and destroyed the agriculture. If salt levels are high enough you can basically ruin it forever."
While salinity appears to be falling in surface water - which may be partly explained by a tapering off of dredging in recent months - soil and plants are still being exposed to dangerous salt levels, she said. She has no data for subterranean water and some of the pollution may have migrated into the earth only to be spread further afield, Suzuki said.
UENF's work is not without critics. State-owned water company Cedae challenged UENF's finding of unhealthy salt levels in artesian wells used for drinking water, saying they were too deep to be contaminated by work at Açu.
And Rio de Janeiro's State Agricultural University said its tests found water around Açu to be safe for irrigation after the initial spikes, but those tests are not as recent as UENF's.

SICK CATTLE, DEAD PINEAPPLES

The Quitingute Channel runs through the land of Durval Ribeiro Alvarengo, 59, a tall, wiry and leather-skinned farmer and cattle rancher.
Late last year, Alvarengo told Reuters, he noticed his dairy cattle had diarrhea and their grassy fodder was dying. As milk production plummeted, he had to slaughter most of his herd.
The loss of 150,000 pineapple plants cost him 300,000 reais ($137,743), he said. Many fish, birds and other small wildlife also disappeared from the area, he added.
His story is repeated on nearby farms.
"You can see how my crops have been ruined with your own eyes," said Alvarengo's neighbor, Jose Roberto de Almeida, 51, as he ripped up crackly, dried-out plants from the ground.
Ricardo Hirota, director of the Subterranean Water Center at the University of São Paulo, is conducting two studies for LLX on the impact of dredging.
One examines ways to control the impact of future dredging. The second is assessing the impact of the original waste dumps to prevent a repeat of the salt pollution problem in late 2012.
Hirota suggests that the company has learned from its experience at Açu. "The area is very sensitive and there are many links between surface and underground water," he said. "We're learning a lot. The good thing is they're better prepared than in the past."
He declined to share any data, citing an LLX confidentiality agreement.
"I think you can appreciate how sensitive this is," he said. "The company has been under a lot of pressure."
Much may depend on the case launched by Oliveira. Even if he loses - and courts have often rejected his claims - a Brazilian prosecutors' near-complete independence, coupled with a legal system that encourages multiple appeals, can stretch even flimsy prosecutions into decade-long ordeals.
A senior official in the prosecutor's office said it expects public hearings by the end of August. The official declined to be identified.
"Eike needs to be very careful; Brazilians like to kick you when you're down," said Wilen Manteli, president of Brazil's private port association. "An environmental problem, even if unfounded, can be a lightning rod for a range of attacks. It would be a pity if this port does not get built."
($1 = 2.27 Brazilian reals)
(Additional reporting by Sergio Queiroz; Editing by Martin Howell and Leslie Gevirtz)

With roughly $300 million in assets, the gold fund is the smallest portfolio in his New York-based firm's lineup with less than 2 percent of its assets and it invests mostly Paulson's personal moneyThe fund's assets have fallen from roughly $700 million at the end of the first quarter

John Paulson's gold fund has lost 65% of its value so far this year after it declined 23% last month, says people familiar with the matter.

Paulson gold fund plunges 65% through June

Author: Svea Herbst-Bayliss & Katya Wachtel (Reuters)

Posted: Tuesday , 09 Jul 2013

BOSTON (Reuters) -

Hedge fund manager John Paulson's gold fund has lost 65 percent of its worth so far this year after the portfolio declined 23 percent last month, two people familiar with the fund said on Monday.Gold had been one of the billionaire investor's winning bets a few years ago, but not this year. His investments in gold and gold miners have suffered double digit losses for the past three months.In June, gold tumbled 12 percent in the wake of fears the Federal Reserve might taper its economic stimulus by cutting monthly bond purchases. It is unclear how a 12 percent drop in the price of the precious metal translated into a 23 percent fall in the fund in June, and whether it is the result of the bet having been leveraged up through borrowing and the use of derivativesA spokesman for Paulson declined to comment.With roughly $300 million in assets, the gold fund is the smallest portfolio in his New York-based firm's lineup with less than 2 percent of its assets and it invests mostly Paulson's personal money, the people familiar with the fund said.The fund's assets have fallen from roughly $700 million at the end of the first quarter, according to those people.They did not want to be identified because the information is private.The gold fund, which at one point managed almost $1 billion, rose 35 percent in 2010 and contributed to Paulson's estimated $5 billion payday that year.As the heavy losses made for outsized headlines in recent months, Paulson decided a few weeks ago to report the gold data only to the gold fund investors, not investors in his bigger and better performing funds. In April, Paulson garnered unwanted attention when the gold fund lost 27 percent as the price of the metal plunged 17 per cent over two weeks."Paulson's impact on the gold market is dramatic. In particular his size alone, on the way in or way out," said John Brynjolfsson, managing director of global macro hedge fund Armored Wolf LLC. "But one needs to look beyond his size alone because his positions are relatively widely publicized, and representative of how others are thinking, so thereby their impact gets magnified."The gold fund is one of a handful of funds that make up Paulson's New York-based hedge fund, which at its peak in 2011 managed about $38 billion. The firm now oversees about $19 billion in investor money.Most of Paulson's bigger funds are in the black this year, but the gold investments have weighed down returns of the Advantage Funds, which lost 3.06 percent last month, shrinking the year's gains to 1.17 percent.Paulson & Co's largest holding by market value at the end of the first quarter was the SPDR Gold ETF, with 21.8 million shares, according to a regulatory filing. The firm also had large stakes in gold mining companies through March, those filings showed.Paulson launched his gold fund in 2010, requiring outside investors to commit $10 million each. He hired gold industry experts Victor Flores, HSBC's former senior gold mining analyst, and John Reade, a former senior metals strategist at UBS. The fund is now called the PFR Gold Fund, in a nod to their last names.Paulson's investments in gold are one reason he rose to prominence on Wall Street.After earning billions betting against the housing market before the financial crisis, Paulson made roughly $5 billion in 2010 thanks to prescient bets on the economic recovery and gold.Paulson is not the only brand-name manager hit by the gold rout. David Einhorn's Greenlight Capital Management's offshore gold fund fell 11.8 percent in June, bringing year-to-date losses in the fund to 20 percent, Reuters has reported.

Batista to repay banks in full, bondholders – forget it: Valor

A report in Valor Econômico on Thursday makes joyous reading for the bankers of struggling tycoon Eike Batista and represents the portents of doom for original holders of his international bonds.

Apparently, Batista and BTG Pactual, the Brazilian investment bank controlled by Andre Esteves, have cooked up a restructuring plan in which the billionaire will reduce his stakes in his more valuable companies to become a minority shareholder.

...

Eike will emerge with personal wealth of about $1bn or $2bn – well short of his $30bn peak but still not bad for a few years spent selling dreams.

Bondholders, on the other hand, will lose their shirts. OGX, his oil flagship, owes about $4bn and has assets worth about $2bn in terms of oil blocks, a gas field and some other bits and pieces. Bondholders will be offered the choice of a buyback at a haircut or a combination of a buyback and an exchange of debt for equity (though equity in what, one must ask?).

"Its fall has been a remarkable and painful drop for investors seeking financial protection," says Adrian Ash, head of research at BullionVault.com. "In the past 45 years we have only had three occasions when gold prices fell harder – in summer 1974, spring 1980 and early 1981."